Crypto Firms Challenge DOJ’s “Overly Expansive” Money Transmitter Laws

Leading cryptocurrency organizations have united against what they describe as the U.S. Department of Justice’s overreaching interpretation of money transmission laws that threatens the future of crypto development in America. The DeFi Education Fund, along with 34 major industry players including Coinbase, Kraken, and Andreessen Horowitz, delivered a formal letter to Congressional committees on March 26.

The coalition argues that the DOJ has adopted an “unprecedented and overly expansive” interpretation of Section 1960 of the U.S. criminal code, which defines unlicensed money transmitters. According to the signatories, this interpretation jeopardizes not just crypto innovation but potentially software development across multiple industries.

Amanda Tuminelli, DeFi Education Fund’s executive director and chief legal officer, emphasized the urgency of the issue, stating: “The DeFi Education Fund’s number one policy priority is obtaining Congressional clarity on Section 1960,” which she claims has enabled “regulation by criminal indictment.”

A central example of this controversial application of money transmitter laws is the ongoing prosecution of Roman Storm, co-founder of privacy protocol Tornado Cash. Storm was arrested on money laundering charges, with the DOJ highlighting the protocol’s use by state-sponsored Hackers. While Storm’s defense argued the code is protected speech, Judge Katherine Polk Failla allowed the case to proceed based on the statutes under which Storm was charged.

“These laws do not target protected expressive conduct,” Judge Failla stated. “They punish money laundering, […] the operation of an unlicensed money transmitting business, and […] sanctions evasion.”

The letter specifically addresses the apparent contradiction between how money transmission is defined in two sections of U.S. code. Section 1960 and Section 5330 contain “substantively identical” definitions of money transmitting businesses, according to the DeFi Education Fund. Yet the DOJ has taken the position that the Bank Secrecy Act’s definition isn’t relevant when determining unlicensed operations under Section 1960.

The DeFi Education Fund asserts that “in no case has a criminal court’s analysis of Section 1960 supported or endorsed the DOJ’s novel interpretation.”

Beyond Coinbase and Kraken, the coalition includes other major industry players such as crypto.com, Paradigm, Dragonfly, Uniswap Labs, Polygon Labs, and ConsenSys (an investor in Decrypt).

Despite recent progress in cryptocurrency regulatory matters under the Trump administration, including the SEC’s closing of several investigations and movement on stablecoin regulations, the DeFi Education Fund maintains that resolving the Section 1960 interpretation remains crucial.

“We are seeing incredible progress, and as an industry are working towards a goal of ‘durable wins’—ultimately, our priority is to ensure that software developers (for DeFi, crypto, AI, etc.) are protected for the long-term,” a DeFi Education Fund spokesperson told Decrypt.

This dispute has already reached the courts beyond the Storm case. Earlier this year, non-custodial software developer Pharos sued the DOJ regarding its broad interpretation of Section 1960, alleging that the agency effectively criminalizes cryptocurrency development through this approach.

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